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A taxpayer inquired whether they could apply the 40% reduction to their Personal Income Tax (IRPF) when redeeming a pension plan due to serious illness. The Directorate General for Taxes (DGT) ruled that this reduction only applies to the portion of contributions made up to 31 December 2006.
This ruling clarifies that the tax relief for early redemption due to serious illness is strictly limited to pre-2006 contributions, meaning more recent contributions will be taxed as employment income without the 40% reduction.
The tax team reviews your specific situation.
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